Lehman debtor's creditors sue to recover funds, swap agreement collateral

By Caroline Salls

Pittsburgh, Oct. 23 - Lehman Brothers Holdings, Inc. debtor Lehman Brothers Special Financing, Inc. was named as a defendant in two lawsuits filed Thursday to recover funds and securities, according to filings with the U.S. Bankruptcy Court for the Southern District of New York.

Specifically, Sola Ltd. is looking to recover $3 million that was allegedly inadvertently transferred to an account of Lehman Brothers Special Financing held at JPMorgan Chase Bank, which was named as a co-defendant in the Sola lawsuit.

Sola said its funds have not been released since the administrative error was found, despite repeated requests to both the Lehman affiliate and the bank.

In addition to the return of the funds, Sola is asking the court to order JPMorgan to pay damages arising from the conversion of the Sola funds for its benefit.

In addition, Royal Bank America filed a lawsuit against Lehman Brothers Special Financing looking to recover a Fannie Mae mortgage-backed security and any proceeds and interest distributions related to the security.

Royal Bank said it terminated a July 2002 ISDA master swap agreement before Lehman's bankruptcy filing, obligating Lehman Special Financing to immediately return posted collateral.

However, the bank said Lehman Special Financing has refused Royal Bank's demands to return the collateral.

As of Sept. 30, Royal Bank said the value of the Fannie Mae security was $4.91 million.

New York-based Lehman Brothers Holdings, the fourth-largest U.S. investment bank, filed for bankruptcy on Sept. 15. Its Chapter 11 case number is 08-13555.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.